Falling Euro Could Be Less Benign Than It Looks

BAML’s David Woo says currency swings could hurt stocks and pressure Beijing to devalue the yuan.

We recently made the case that an unspoken currency war has broken out. Our view is predicated on the assumption that for many countries facing zero interest rates and binding fiscal constraints, currency devaluation is the only policy tool left at their disposal to stimulate growth. In our view, such policy is carries risks in that (1) in an extreme scenario it could become a zero-sum or even...